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we are a Canadian company selling to distributors located in

California who resell our products...
we are a Canadian company selling to distributors located in California who resell our products into California retail stores...do we have any state income tax obligations with respect to California
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Answered in 26 minutes by:
10/17/2013
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 3,854
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
Verified
Welcome. Thank you for choosing us to assist you. My name is XXXXX XXXXX my goal is to help make your life, a little... less taxing.

As a foreign company doing business in the state of California (selling to distributors located in California), you are required to qualify or register as a foreign business entity. SEE BELOW:

Do I have to qualify or register a foreign (out–of–state or out–of–country) business entity?

Before transacting intrastate business in California the business must first qualify/register with the California Secretary of State. (California Corporations Code section 2105, 15909.02, 16959 or 17451.) California Corporations Code sections 191, 15901.02(ai) and 17001(ap) define "transacting intrastate business" as entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce.

-----------------------------

How Do I qualify or register a foreign (out–of–state or out–of–country) business entity in California?

A foreign business entity can qualify/register to transact business in California by filing the applicable form (as described below) with the California Secretary of State. The forms described below are available on our Forms, Samples and Fees webpage. Please refer to the form for complete filing instructions, fees, any additional requirements and relevant statutory filing provisions:

Corporation: File a Statement and Designation by Foreign Corporation (Form S&DC–S/N [for foreign general stock or nonprofit corporations], Form S&DC-PC [for foreign professional law or accountancy corporations] or Form S&DC–INS [for foreign insurer corporations) and attach to the completed form a valid certificate of good standing by an authorized public official of the foreign jurisdiction under which the foreign corporation is incorporated.

Limited Liability Company: File an Application to Register (Form LLC–5) and attach to the completed form a valid certificate of good standing by an authorized public official of the foreign jurisdiction under which the foreign limited liability company is organized.
Limited Partnership: File an Application for Registration (Form LP–5) and attach to the completed form a valid certificate of good standing (or other record of similar import) by an authorized public official of the foreign jurisdiction under which the foreign limited partnership is organized.

Limited Liability Partnership: File an Application to Register a Limited Liability Partnership (Form LLP–1) and attach to the completed form a valid certificate of good standing (or other record of similar import) by an authorized public official of the foreign jurisdiction under which the foreign limited liability partnership is organized.

REFERENCE SOURCE:

http://www.sos.ca.gov/business/be/faqs.htm#form-question7

--------------------------------

As for tax obligations, SEE BELOW:

Do I have to pay a minimum franchise tax for my corporation
doing business in California?

For your first taxable year:

• If your corporation incorporates or qualifies to do
business in California on or after January 1, 2000, you are
not subject to the minimum franchise tax. Your
corporation is still liable for a franchise tax on its net
income.

• If your corporation is a limited liability company treated
as a corporation doing business in California, you are also
not subject to the minimum franchise tax if your limited
liability company was organized or registered to do
business in California on or after January 1, 2000.

• If you are a foreign corporation that is not qualified to do
business in California, but are doing business in the state,
you are subject to the minimum franchise tax.

REFERENCE SOURCE:

www.ftb.ca.gov/forms/misc/1083.pdf

----------------------------

Minimum franchise tax for the state of California is currently $800/year.

Please let me know if I can be of further assistance to you regarding this matter.

As we know that you have choices, we thank you for choosing this Q&A service for assistance.

Ask Your Own Tax Question
Customer reply replied 4 years ago

the california distributors take possesion and pay for our goods in Canada and then transport to california ....do we still have to register in California if all we're doing is exporting?

Hello again,

My initial thought is that as you are not transacting business IN the state of California that you would not have to register with the state. However, when it comes to sales tax matters, some states stipulate that when you have a distributor in that state, that would constitute a physical presence in that particular state for tax purposes. I know that we are not talking about sales taxes here, I am just using that as an example as to the "grey" area here. As I cannot say for certain that you would not have to register with the state, my suggestion would be to contact the California Secretary of State office directly and get the correct information from them. Their contact number is XXXXX follows: (NNN) NNN-NNNN

Thank you again for selecting this Q&A service to assist you.
Tax.appeal.168
Tax.appeal.168, Tax Accountant
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